Family Trust Set Up

Also commonly referred to as a “Discretionary Trust” a Family Trust formalises an arrangement where a Trustee is permitted to hold assets for a Beneficiary (or Beneficiaries) and to distribute income and capital between the Beneficiaries as and when the Trustee exercising discretion decides.

The person who sets up the Trust is called the Settlor. He or she is the person who contributes the original property or amount of money (called the settled sum) to enable the Trust to commence (see question “What is the amount of a settled sum?”).

The Trustee can be an individual or a company and is appointed by the Appointor when the Trust is first established. If the Trustee is an individual the Trustee should be a person in whom the Appointor and the Beneficiaries have total confidence. Commonly (and this is the Patricia Holdings recommendation) the Trustee is a company. If the Trustee is a company then the directors of the company should be individuals in whom the Beneficiaries have total confidence. There is a legal separation between individuals in their capacity as Directors of the company and their capacity as Beneficiaries of a Trust. It is very common for the Directors of the Trustee Company to be the same individuals as the Nominated Beneficiaries so in effect the Nominated Beneficiaries have effective control and management of the Trust.

The Beneficiaries or Beneficiary are the persons or person for whom the Trust is established. There are commonly two levels/types of Beneficiaries.

Nominated Beneficiaries are named and are intended to be the primary Beneficiaries of the trust. A Patricia Holdings deed allows for a broad pool of General Beneficiaries associated with the Nominated Beneficiaries to give the Trustee maximum flexibility. Our Trust deed allows for the following to be deemed General Beneficiaries:

Relations of the Nominated Beneficiaries which includes the parents, brothers, sisters, spouses, widows, widowers, children, children’s children, adopted children, and any lineal or lateral relation of the “Nominated Beneficiaries”, the spouses, widows, widowers, children and grandchildren of such brothers, sisters, spouses, children and descendants and next of kin. These include any person filling any of the above categories by reason of lineage, adoption or bona fide domestic relationship, including a bona fide relationship between persons of the same gender.” “Related Corporations and Trusts”, “Directors of Related Corporations”, “Shareholders of Related  Corporations”, “Legal Personal Representative” of a General Beneficiary, and “Charities and Institutions”

The Trust deed also provides for Additional General Beneficiaries. These are Beneficiaries (persons or companies) who are not related to the Nominated Beneficiaries, so are not included in the pool of General Beneficiaries (as defined above). Persons or companies related to Additional General Beneficiaries are not included in the pool of General Beneficiaries.

Should you wish to order a “Bloodline Trust”, please contact our team on 02 9953 2399 or via This email address is being protected from spambots. You need JavaScript enabled to view it..

The existing Trustee may resign or be removed. If by resignation it can be verbal or in writing (in writing is preferable).

If there is more than one Trustee, the notice, whether verbal or in writing, is given to the other Trustee or Trustees if there is more than one Trustee. If there is only one Trustee then the notice is given to the Nominated Beneficiaries.

A Trustee can be removed by the Appointor. Depending upon the wording of the Deed, either the retiring Trustee appoints a new Trustee or the Appointor appoints a new Trustee. The appointment should be in writing, preferably by Deed and should be signed by the new Trustee and incorporate an undertaking by the new Trustee to act as Trustee and discharge the duties of a Trustee set out in the Deed and at law.

Most Family Trust deeds provide that it is the Appointor that has the power to remove an existing Trustee and appoint a new Trustee.

The Patricia Holdings Family Trust deeds provide that the Appointor is the person who may remove a Trustee and appoint a new Trustee except in the following cases:

• if there is no Appointor then a Trustee (either the retiring Trustee or a continuing Trustee) has the power to appoint a new Trustee 
• if the Trustee has died then the deceased Trustee's Executor (Legal Personal Representative) has the power to appoint
• if the Trustee or Legal Personal Representative fail or refuse to appoint then the Nominated Beneficiaries can appoint.

In the current Patricia Holdings Family Trust deed, it is either the Trustee or the Appointor who has the authority to add a new Trustee. The appointment can be verbal or in writing (in writing is preferable). Generally the appointment is in the form of a Deed. The new Trustee must, when accepting the appointment, undertake to carry out the duties of Trustee and discharge the obligations contained in the Trust deed and at law.

This depends entirely upon the wording of the Trust deed. Most Trust deeds provide that there are two ways of removing a Beneficiary:

1. the Beneficiary by document in writing renounces his or her interest as a Beneficiary (a Renunciation may be mandatory if the change is made in conjunction with a Centrelink Declaration); or
2. the Trustee makes a declaration that henceforth a particular Beneficiary will no longer be a Beneficiary. The Trustee should carefully study the Deed to make sure that the Trustee has that power. The Patricia Holdings Deed does give the Trustee the power to remove a Beneficiary. The Trustee should be very careful when removing a Beneficiary not to create a re-settlement.

Any amount however small can be the settled sum. It can be as low as $1.00, commonly it is $10.00 or $100.00. It is a good idea to make the settled sum sufficiently large so as not to be completely absorbed by Bank Fees. What a Trustee must be ever vigilant for is to ensure that the settled sum is properly receipted into the funds of the Trust and accounted for throughout the life of the Trust. This is because if the settled sum is never paid to the Trustee as the seed capital of the Trust then the Trust never comes into existence.

The Additional General Beneficiaries (otherwise known as general Beneficiaries) are Beneficiaries who fall within a very general description of Beneficiaries. They are in some general way related or associated (often quite distantly) to the Nominated Beneficiaries (they may include Companies, Trust, Superannuation Trusts and the like in which a Nominated or other General Beneficiary has an interest).

Our order form invites you to nominate “Additional General Beneficiaries” if you choose. Individuals or entities named as Additional General Beneficiaries are Beneficiaries of the trust but do not benefit from the lineal or lateral provisions that the Nominated Beneficiaries enjoy. I.e. the Trustee has no discretion to distribute income or capital to related individuals or entities related to the “Additional General Beneficiaries”.

A Charity can be an Additional General Beneficiary.

Since 2015, the various State Revenue Offices (SROs) have been introducing potential surcharges on trusts that do not exclude foreign persons (or “absentees”) as beneficiaries, or, have foreign persons acting as trustee and hold property in the trust. Generally speaking, ‘foreign person’ means a person (or entity) that does not ordinarily reside in Australia and can include:

• an individual
• a corporation
• a trustee of a trust
• a beneficiary of a trust
• a government
• a government investor
• a partner in a limited partnership.

Even if a foreign person has not been named as a beneficiary, due to the general pool of beneficiaries defined in the deed, a foreign person may in fact be eligible to receive distributions thus the trustees may be liable for surcharge payments even when they have not, nor do they intend to, distribute to foreign persons.

Patricia Holdings offer two versions of our Family (or Discretionary) Trust Deeds for whether you wish to allow or disallow foreign persons from benefiting from the trust. If your deed has already been prepared and does not currently exclude foreign persons, we can prepare an amendment for you irrevocably excluding foreign persons from benefiting. This amendment can be ordered here.

For an overview of the surcharges currently in place around the country, please download our fact sheet.

Patricia Holdings can help change the name of your Trust. The Trustee elects to change the name of the Trust and then confirms that election in writing. A Trustee must ensure that if a Trust changes its name that every person who has business dealings with the Trust deed and every Nominated Beneficiary of the Trust is notified of the change of name. We can provide all the paperwork required for $143 delivered as a PDF or $176 for printed and couriered documents.

Yes, every Trust  must have a Trustee. This is because the law requires that for a Trust to exist there must firstly be some Trust property and secondly, it is the Trustee (or Trustees) who hold the Trust property on Trust for a Beneficiary or Beneficiaries (there must be a separation between the legal and equitable ownership). A Trust is not considered a legal entity.

The State of Jurisdiction of a Trust is determined by where the Trust conducts its business. As soon as a Trust (the Trust is made up of the Trust assets) is moved from one State to the other then the Jurisdiction of the Trust deed moves to the new State. Trustees must be aware that if a Trust is moved from one State there may be a requirement for Stamp Duty to be paid in the new State.

A Trustee winds up a Trust by:

• making a Declaration (in writing) that the Trust is to vest (that is the Trust ends and the Trust assets be distributed to the Beneficiaries);
• collecting in all of the Trust assets and converting them into cash (unless the Trustee proposes to make an in specie distribution);
• all debts of the Trust must be paid and all tax must be paid;
• if the Trust is a Family Trust, the Trustee must exercise a discretion and determine who among all the Beneficiaries is to receive the Trust assets;
• the assets (or cash) are then distributed;
• notice is then given to the Taxation Department that the Trust has ceased to exist.

Generally speaking, no. There must be a difference between the legal person of the Trustee and the legal person of the Beneficiary to enable a Trust to exist. However it can validly be argued that in all Family Trusts, because there are General Beneficiaries as well as Nominated Beneficiaries, the answer is they can be. It is Patricia Holdings experience though that most Banks refuse to lend to a Trust where the Trustee is one and the same as the sole Nominated Beneficiary.

No, for two reasons:

1. Section 102 of the Income Tax Assessment Act 1936 provided that if the person who establishes a Trust (the Settlor) has the power to terminate a Trust (that is, is the same person as the Trustee and in some cases a Beneficiary) then the Trust will be deemed not to exist and the Settlor will be personally taxed on the whole of the Trust income.
2. If the Settlor is a Beneficiary then the Settlor will not have divested him/her self of the Trust assets and as a consequence no Trust relationship can exist.

The Trustee of the Beneficiary Trust "as Trustee for" the Trust.

Any individual, company, or incorporated association can be a Trustee provided that the person or directors are not bankrupt, minors, or disqualified persons.

Any address that will enable the Trustee and Beneficiary to be identified usually the registered office for a company or Trust and a residential address for an individual.

The Trustee must have an Australian address as they have Governance responsibility for the Trust and therefore need to be accessible to the Legal Jurisdiction under which they operate. The state or territory of Jurisdiction can be nominated, but should the Trust be subject to legal proceedings, this is only one of the factors that will be taken into account when determining the appropriate Jurisdiction for the action.

No. The sole function of a Settlor is to establish the Trust. Once established and the settled sum has been paid to the Trustee the Settlor has no further involvement with the Trust.

Generally speaking, yes. But the definition of Beneficiary in most Family Trust deeds is very broad so it may not ever be necessary to add a Beneficiary. It is also worth noting that if a Beneficiary that could not be contemplated under the wide definition is added then the addition can create a resettlement with potential disastrous Capital Gains Tax and Stamp Duty requirements.

A Trust  must vest (be wound up and its assets distributed) within 80 years of being set up (except in South Australia where the Law relating to perpetuities does not apply). The Patricia Holdings Trust deed provides for the Trust to have a maximum life of 79 years. A Trust can be wound up at any time within the 79 years.